ISLAMABAD: Pakistan has reported an alarming increase in its trade deficit in the month of November 2021 on year-on-year basis. In November this year, the country has sustained a record $5.11 billion trade deficit, whereas, in the same month in 2020, the trade imbalance amounted only to $1.94 billion in November last year. In percentage the trade deficit ballooned by 163% in Nov-2021.
Meanwhile, the trade imbalance is showing a worsening situation in the wake of rising imports but that he had not thought that the import bill would touch the $8 billion mark on a monthly basis in November 2021 against exports of $2.9 billion.
The overall trade deficit has risen sharply and mounted to $20.7 billion in the first five months (July-November) period of the fiscal year 2021-22. During this period, the exports fetched $12.37 billion, but imports surged to $33.11 billion. The trade deficit stood at $9.54 billion in the same five months of the last fiscal year. The trade deficit in five months of FY2022 was up by 117%.
This trend indicates an alarming situation and it is one of the three factors which bulldozed stock market on Thursday (2000+ points down). The pressure on the exchange rate might further escalate in the months ahead because of this development.
Another embarrassing development is that the Consumer Price Index (CPI) is constantly growing. Some government officials believe that CPI-based inflation could be above 10% mark for November 2021 against 9.2% for October, 2021.
The trade deficit stood at $3.87 billion in October, 2021 as exports stood at $2.7 billion and imports $6.33 billion.
This prevailing trend shows that the trade gap is widening on a monthly basis and it now might have rung alarm bells among the dwellers of Q Block (Ministry of Finance).
Rising import bill
Shaukat Tarin, the PM’s adviser on finance, chaired a meeting in the Ministry of Finance to review the increasing import bill and directed the authorities concerned to take steps to curtail the import of luxury items.
The break-up data of imports shows that the import of food items stood at $911 million, energy, including POL products and RLNG $2.4 billion, raw material $2.2 billion, machinery $1.14 billion and COVID-19 vaccine $621 million in November 2021.
There is not much space left with the government to curtail imports, however, the Ministry of Finance is continuously contemplating upon options to slap a ban on the import of cars and jack up the Regulatory Duty (RDs) and Additional Customs Duty on 10 to 12 other luxury items in order to reduce the import bill.
The third negative development is the continuous haemorrhaging of the stock market and depreciating exchange rate as it nosedived.
